Russia in details: events and trends in Russia over the last week (20.08-26.08)

Events and trends in Russia over the week of August 20^th – 26^th

• The death of Dugin’s daughter allowed the Russian authorities to exert their influence in several directions at once: to shift the emphasis from failures at the front and problems in Crimea. It is precisely what was done: 1) the shellings in Crimea had been downgraded in their priority, and Shoigu’s statement about “stopping the offensive” was passed as “secondary” news; 2) the news neutralized information about the possible recognition of the Russian Federation as a state sponsor of terrorism; 3) legitimization of a potential increase in the shelling of Ukrainian territory.

• Several public speakers from the Russian Federation have recently made statements about readiness for armistice negotiations. To increase the pressure on Ukraine and its allies, Russia raises the stakes again: it is threatening missile attacks on government facilities, risking a nuclear accident at the ZNPP, holding pseudo-referendums, and cutting off gas supplies. If the West is consistent in supporting Ukraine’s demands, Russia will have no other arguments, and its blackmail will fail. The West has announced its consolidated position on refusing to negotiate a truce until the liberation of the occupied territories – be it voluntarily or by military means.

• VK transfers the food delivery service aggregator “Delivery club” to Yandex and, in return, receives control over “Yandex. Novosti” and “Yandex. Zen”. Thus, by seizing key Russian information resources on the Internet, the Gref-Kirienko group completes the creation of the largest “new media” holding in the Russian Federation, with the help of which it expects to gain influence within the country and in the post-Soviet space.

• In August, the EU embargo on the import of Russian coal entered into force. The EU market was one of the largest for the Russian Federation and commensurate with the volumes of Russian coal imports to China. However, the Russian Federation has a chance to replace supplies to the EU with Asian markets. However, it may have to be dumped, similar to oil.

• The rate of currency outflow from the accounts and deposits of Russians increased by 15 times compared to June. It is expected that currency outflows may slow down amid tough new sanctions and fears of secondary sanctions from foreign banks. However, in July, the outflow might have increased not only in light of the news about the reduction of currency in accounts but also because the ruble was strong enough in June-July to activate the withdrawal process.

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The Gref-Kirienko Group completes the monopolization of Russia’s Internet resources

On August 23^rd, it became clear that there had been an exchange of assets between the VK company (former Mailru Group) and Yandex. VK transfers the food delivery service aggregator “Delivery club” to Yandex and, in return, receives control over “Yandex. Novosti” and “Yandex. Zen”.

At first glance, it may seem like unremarkable news, considering previous events. Still, it allows us to conclude that the majority of crucial news resources now will be concentrated in the hands of one group of Russian political elites – the Gref-Kirienko group.

Background or how Putin gained control over Internet resources

By the end of 2010, Putin’s entourage faced the problem of controlling Internet publications. Controlled television resources and print media rapidly lost audiences to new media and social networks. It periodically became a problem, such as Durov’s (the owner of the Vkontakte network) position in 2014 regarding the Revolution of Dignity in Ukraine or earlier the conflicts of RBC, Kommersant, and Lenta.ru with Putin’s entourage.

Three groups immediately began concentrating on the resources.

1. On the one hand, Alisher Usmanov, who owned Megafon shares, has become involved in a joint IT business with Alibaba (PRC), Mailru Group, and the Russian Direct Investment Fund. And already in 2012, the USM international holding was created and controlled by Usmanov (60% of the shares initially and approximately 79% in 2020), which united the oligarch’s metallurgical, media, and information assets. In 2013, the MF-technology company was created, which is a joint business of “Sberbank” (Gref), “Rostechnologiy” (Chemezov), “Megafon”, and USM (Usmanov). It got control over the shares of Mailru Group (including the My World social network). “Kommersant”, bought by Usmanov earlier, remains outside the new holding. By the end of 2013, USM (through the Mailru Group) had already fully controlled the Odnoklassniki social network, the Lithuanian social network One, educational portals, and part of video hosting. In May 2014, the holding gained control over 100% of the shares of the Vkontakte social network.

• The second direction was the Gazprom-media policy. Gazprom’s subsidiary owned the NTV TV channel, the newspaper “7 dnei”, and gained control over the radio (and portal) Ekho Moskvy, video hosting Rutube, streaming services Premier, Vokrug TV, etc. It is worth noting the closeness of Usmanov and Gazprom – the oligarch headed Gazprom-invest for a long time.

• In particular, there was activity on the part of Sberbank, which, together with Potanin in 2013, began the process of entry (and then absorption) of another information giant of the Russian market — the Rambler group. In December 2020, “Sberbank” announced control over 100% of the shares of “Rambler Group”, in addition to the “Rambler” search engine, mail, news aggregator, and “Live Journal”. A little later, he closed the deal on the takeover (joining the Rambler group) of the Lenta.ru portal.

Thus, up until 2020, among the “giants” of the Russian Internet news market, only RBC (GC “RosBusinessConsulting”) and Yandex have remained formally independent.

At the same time, 51% of RBC’s shares were owned by Mykhailo Prokhorov, who bought the asset in the mid-00s because of Rosbiznesconsulting’s financial problems. Negative articles on the portal (at the same time as Prokhorov’s activation in the political field) forced it to be sold. In 2016, RBC was sold to the co-owner of Komsomolskaya Pravda, Grigory Beryozkin (and the shares have been registered to his wife). The editorial policy of RBC has radically changed. The publication remained loyal to the target group – the middle class and business, but materials criticizing the policy of the Russian government practically disappeared.

The situation with Yandex was different — it has almost been involved in the joint business of Sberbank and MF Technologies and the projects of Sber and Rostech. However, Yandex’s owners did not agree to the merger and transfer of their shares to business partners. On the other hand, after 2019, the company was forced to introduce elements of censorship in its search engine (only with materials undesirable to the authorities of the Russian Federation from the “first page of the search”) and news feed.

At the end of 2021, Sberbank exited the board of shareholders of MF Technologies, selling its share (36%) to Gazprombank. And on December 2^nd, 2021, the Sogaz insurance company, owned by Kovalchuk’s entourage and Gazprom (approximately 21%), announced the acquisition of another 45% of the shares of MF Technologies. Thus, “Gazprom” got control over Mailru Group and turned it into VK company, whose general director was Vladimir Kirienko, the son of politician Sergey Kirienko. At the same time, VK did not become part of the Gazprom-media holding, remaining independent in its development policy. Usmanov maintains his presence in the VK company at the expense of a 9% package in the USM holding.

Finally, on August 23^rd, 2022, it was announced that VK would hand over the food delivery service aggregator “Delivery club” to the company “Yandex”, receiving in return the services “Yandex.Novosti” and “Yandex.Zen”. Thus, Vladimir Kirienko will control the most influential news holding, including the three largest social networks and two news aggregators.

Analysis and conclusions

After the closing of the agreement between VK and Yandex, three major players remain in the Russian market of online news and social networks:

1. Sberbank, which controls the Rambler group (including Lenta.ru and 3 video hosting companies);
2. Gazprom-media, which controls the largest streaming platforms (including Internet TV);
3. The VK group which united social networks “Vkontakte”, “Odnoklassniki”, “Yandex. Zen”, “My World” and the most extensive news aggregators (“Mail.ru” and “Yandex. Novosti”), although it is under the joint control of “Gazprom” and Kovalchuk, but has its own development policy.

RBC and Kommersant remain independent, but their “niche” projects are designed for a more liberal readership.

However, from a management and ownership perspective, we have one giant news group (Rambler, VK, and Yandex) under the control of the Gref-Kirienko political group. Sberbank owns the first, and Kirienko’s son manages the second and third ones. Under their control are:

• ALL Russian social networks;
• The three largest news aggregators;
• Six of the TOP-10 most visited Internet resources.

This political group will set the information agenda for the younger voter and representatives of the middle class. RBC and Kommersant niches will work in cooperation with them (or in the format of an agreed information policy).

Gazprom-media, for its part, will focus on expanding its presence in the field of streaming platforms, trying to take control of websites for television streamed on the Internet.

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Russia sends signals of readiness for a truce and blackmails with escalation

Recently several public speakers from the Russian Federation have made statements about readiness for armistice negotiations. Thus, on August 25^th, on the sidelines of the State Duma of the Russian Federation, the head of the committee on international affairs, Slutsky, said that if the Ukrainian side declares that it is ready for negotiations in any format and at any level, then the Russian side will consider it.

Russia’s openness to negotiations could have probably been announced in the internal part of the negotiations during the visit of the President of Turkey R. Erdogan to Ukraine on August 18^th. The Turkish leader declared his readiness to mediate in negotiations on the exchange of prisoners of war at the end of the war.

D. Arahamia also reported on signals from the Russian side. Publicly, at such negotiations, Russia may once again announce a list of its unacceptable political demands to Ukraine that do not correspond to the military outcome of hostilities. The minimum program for the Russian side can be the announcement of an indefinite ceasefire. The Russian leadership is concerned about explosions in the rear areas, including at military facilities in the occupied Crimea. The cessation of fire will allow the Russian army to regroup armed formations without the risk of missile/fire attacks in the places of deployment.

The Ukrainian side put forward its conditions for negotiations. After the meeting with R. Erdogan and A. Guterres, President V. Zelenskyi said that the Russian Federation cannot be trusted; therefore, talks with Russia will be possible only after the withdrawal of Russian troops from all temporarily occupied Ukrainian territories.

In subsequent statements, V. Zelenskyi explained that he would not sign agreements similar to the Minsk agreements because he considers it a trap and actions that will negatively affect Ukraine.

Last week several leaders and spokespeople of Western countries made statements about the inadmissibility and impossibility of concluding a truce with Russia. Thus, German Foreign Minister Annalena Burbok said it makes no sense to start negotiations with Russia about ending the war in Ukraine now.

Western leaders speak of readiness for long-term support for Ukraine and understanding the energy and economic challenges their countries will face due to Russian aggression.

Russia announced plans to escalate the situation to achieve its goals and persuade the Ukrainian leadership to negotiate and Western politicians to change their position. It does look like blackmail and raising the stakes:

1. Leaks of information about possible missile strikes on civilian infrastructure and government facilities in Ukraine have even led to official statements from the US Embassy and increased security in the center of Kyiv. Russia will continue to threaten to conduct attacks on civilian objects, demanding negotiations on its own terms.
2. The occupiers did not stop preparations for holding pseudo-referendums in the occupied territories, threatening to join them in the Russian Federation and to extend the effect of the military doctrine of the Russian Federation to these territories. Apparently, after the annexation, in response to attempts to liberate these territories, Russian troops will be able to use weapons of mass effect. The dates of the referendums have not been announced, but holding them on September 11^th is becoming almost impossible, even technically.
3. Exacerbating the situation around the Zaporizhzhya NPP is also, first of all, blackmail of Western countries. According to the Russian leadership, the threat of an unnatural disaster should force the West to make concessions.
4. The use of energy supplies to Europe as weaponі continues. High gas prices could lead to political protests in European countries and influence the position of governments regarding the war in Ukraine.
5. Plans to hold a show in Mariupol called “The Trial of Captured Ukrainian Servicemen” violate the Geneva Conventions and are designed primarily for the Russian public but are also an element of emotional blackmail. In Ukraine, the bravery of the “Azov” fighters is highly appreciated, and they will try to use the trial over them for informational attacks.
6. Putin’s decree on increasing the number of armed forces by 137,000 service members should signal readiness for large-scale mobilization and total war. At the same time, general mobilization can have destructive consequences for Russian society, so such decisions have an ambiguous effect.

Possible military successes of Ukraine in the first half of autumn 2022 can strengthen the positions of Ukraine and its allies. If the West is consistent in its demands, it will become evident that Russia actually will not have other arguments for raising rates. It is possible to predict an exchange of positions during the G20 meeting in Indonesia, but it is also unlikely that a major peace agreement will be signed there. However, in the presence of the leaders of the leading world countries, we will see a realistic picture, which will be based on the consequences of the autumn military campaign.